Nvidia May Beat Q1, But Q2 Sales Could Fall To $41 Billion On China Ban, BofA Securities Analyst Warns

BofA Securities analyst Vivek Arya reiterated a Buy rating on NVIDIA Corp NVDA with a $160 price target on Thursday.

Arya updated his fiscal first quarter outlook following supply chain insights, investor discussions and Nvidia’s remarks at the recent Computex trade show, particularly concerning the U.S. ban on H20 sales to China.

He highlighted a disconnect between Nvidia's stated $15 billion in lost China sales, the revised fiscal 2026 (calendar 2025) sales estimate of $10 billion–$12 billion and the more conservative $3.8 billion in consensus revisions. Depending on China shipment timing, this could amplify to a $4 billion–$5 billion headwind in the fiscal second quarter.

Gross margin recovery remains a key focus. Arya looks for management confidence in restoring margins to the mid-70s in the second half, driven by Blackwell ramp-up and rack-level product yields.

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Despite these near-term headwinds, Arya considers Nvidia as a top sector pick, citing its unique position in global AI deployment and potential China sales rebound through redesigned, compliant products later in the year.

For the fiscal first quarter, Arya expects a modest beat versus Nvidia's $43 billion guidance and consensus of $43.4 billion. However, the $5.5 billion H20-related inventory write-off may pull gross margins to ~58%, below the 71% guide. He forecasts adjusted EPS at 74 cents, under the consensus of 88 cents. No material H20 impact is expected in the first quarter.

Fiscal second quarter consensus has dropped from $48 billion (pre H20 ban) to $46.4 billion, with investor expectations closer to $45 billion–$46 billion. Current models only reflect a ~$2 billion H20 headwind, which may be optimistic if early-year sales were front-loaded.

By comparison, Advanced Micro Devices Inc. AMD estimated 47% of its $1.5 billion China impact would hit in the second quarter. Applying that ratio to Nvidia’s $15 billion China headwind implies a $7 billion second quarter hit, potentially dropping sales guidance to $41 billion, well below consensus. This would imply an adjusted EPS of ~85 cents, 16% below estimates.

Looking further ahead, Arya estimates the $15 billion China sales headwind could bring fiscal 2026 revenue down to $190 billion, 6% below consensus, and adjusted EPS to $3.93, 10% below the current $4.38, or 14% below the pre-ban $4.56 consensus.

A potential upside could from a faster non-China Blackwell ramp as Nvidia accelerates testing of its move back to “Bianca” compute boards from the prior decision to move to “Cordelia” boards for GB300 GPU.

NVDA Price Action: Nvidia stock is trading lower by 0.76% to $131.82 at publication on Friday.

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